336 research outputs found
On the Computational Complexity of Measuring Global Stability of Banking Networks
Threats on the stability of a financial system may severely affect the
functioning of the entire economy, and thus considerable emphasis is placed on
the analyzing the cause and effect of such threats. The financial crisis in the
current and past decade has shown that one important cause of instability in
global markets is the so-called financial contagion, namely the spreading of
instabilities or failures of individual components of the network to other,
perhaps healthier, components. This leads to a natural question of whether the
regulatory authorities could have predicted and perhaps mitigated the current
economic crisis by effective computations of some stability measure of the
banking networks. Motivated by such observations, we consider the problem of
defining and evaluating stabilities of both homogeneous and heterogeneous
banking networks against propagation of synchronous idiosyncratic shocks given
to a subset of banks. We formalize the homogeneous banking network model of
Nier et al. and its corresponding heterogeneous version, formalize the
synchronous shock propagation procedures, define two appropriate stability
measures and investigate the computational complexities of evaluating these
measures for various network topologies and parameters of interest. Our results
and proofs also shed some light on the properties of topologies and parameters
of the network that may lead to higher or lower stabilities.Comment: to appear in Algorithmic
On Hilberg's Law and Its Links with Guiraud's Law
Hilberg (1990) supposed that finite-order excess entropy of a random human
text is proportional to the square root of the text length. Assuming that
Hilberg's hypothesis is true, we derive Guiraud's law, which states that the
number of word types in a text is greater than proportional to the square root
of the text length. Our derivation is based on some mathematical conjecture in
coding theory and on several experiments suggesting that words can be defined
approximately as the nonterminals of the shortest context-free grammar for the
text. Such operational definition of words can be applied even to texts
deprived of spaces, which do not allow for Mandelbrot's ``intermittent
silence'' explanation of Zipf's and Guiraud's laws. In contrast to
Mandelbrot's, our model assumes some probabilistic long-memory effects in human
narration and might be capable of explaining Menzerath's law.Comment: To appear in Journal of Quantitative Linguistic
North Dakota Strategic Freight Analysis: Item IV. Heavier Loading Rail Cars
North Dakota's grain producers rely on an efficient rail system to move their products to export and domestic markets. A recent shift to larger grain hopper cars may threaten the viability of the state's light-density branch line network. This study simulates the impacts of handling larger rail cars on many types of rail lines, model the decision process used by railroads in deciding whether to upgrade such lines or abandon them, estimates the costs of upgrading rail lines that are unlikely to be upgraded, and estimates generalized highway impacts that could result from the abandonment of non-upgraded lines
Payment by results in international development: Evidence from the first decade
Payment by results is a relatively new way of giving development aid, where a recipient's performance against pre-agreed measures determines the amount of aid they receive. Advocates for the mechanism argue it provides donors with both a ready justification for maintaining aid budgets and better results through innovation and autonomy. It has proved popular, with most bilateral aid donors having at least experimented with the mechanism and the variety of measures stretching from individual health workers being paid for each procedure, to national governments being paid for students' test scores. However, there has not been a robust assessment of whether Payment By Results (PbR) achieves its aims for greater effectiveness. I synthesize the evidence from eight projects fully or partially funded by DFID, the recognized world leader on PbR. This represents the best evidence currently available, and is critically analysed using the leading theoretical framework that breaks each agreement into its constituent parts. I find no evidence that PbR leads to fundamentally more innovation or autonomy, with the overall range of success and failure broadly similar to other aid projects. This may partly be due to the current use of Payment by Results, with no readily identifiable examples of projects that truly meet the idealized PbR designs. Advocates of PbR may thus conclude the idea is yet to be tested. I argue PbR does not deal with the fundamental constraints that donors face, and so it is unsurprising that PbR is subject to the normal pressures that affect all aid spending
Reduction of systemic risk by means of Pigouvian taxation
We analyze the possibility of reduction of systemic risk in financial markets through Pigouvian taxation of financial institutions, which is used to support the rescue fund. We introduce the concept of the cascade risk with a clear operational definition as a subclass and a network related measure of the systemic risk. Using financial networks constructed from real Italian money market data and using realistic parameters, we show that the cascade risk can be substantially reduced by a small rate of taxation and by means of a simple strategy of the money transfer from the rescue fund to interbanking market subjects. Furthermore, we show that while negative effects on the return on investment (ROI) are direct and certain, an overall positive effect on risk adjusted return on investments (ROIRA) is visible. Please note that the taxation is introduced as a monetary/regulatory, not as a _scal measure, as the term could suggest. The rescue fund is implemented in a form of a common reserve fund
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